BNP Paribas SA pleaded guilty and agreed to pay a record US$8.9 billion for violating U.S. sanctions in a case that has spanned several years and reached the highest echelons of French and American diplomacy.

BNP, France’s largest bank, admitted that it processed almost US$9 billion in banned transactions from 2004 to 2012 involving Sudan, Iran and Cuba, the Justice Department said today in a statement. The bank will also be barred from some U.S. dollar-clearing operations for one year, according to the statement.

As part of the agreement, New York’s top banking regulator required 13 executives to leave the bank, including Georges Chodron de Courcel, co-chief operating officer, Vivien Levy- Garboua, former head of compliance, Dominique Remy, former head of structured finance for the corporate investment bank, and Stephen Strombelline, head of ethics and compliance for North America, the regulator said in a statement.

“BNP Paribas went to elaborate lengths to conceal prohibited transactions, cover its tracks and deceive U.S. authorities,” U.S. Attorney General Eric Holder said. “If sanctions are to have teeth, violations must be punished.”

Fallout from the probe, and negotiations over its settlement with state and federal prosecutors, has reached the highest levels of the French and American governments. Overtures this year by numerous French officials, including President Francois Hollande, weren’t enough to persuade U.S. officials to take a more lenient approach with the Paris-based bank.

BNP becomes the second major European bank in the past two months to plead guilty in the U.S. Credit Suisse AG did so on May 19, when it agreed to pay US$2.6 billion, the largest penalty in an offshore tax case, after using secret Swiss accounts to help Americans hide money from the Internal Revenue Service.

The bank was also charged by Manhattan District Attorney Cyrus Vance Jr. in New York with falsifying business records and conspiracy.

BNP Probe

The BNP investigation centered on its commodity-trade finance business in Paris and Geneva. About 30 executives who worked there have resigned, gone on leave, been fired or relocated since 2012, people familiar with the matter have said.

The majority of the illegal payments were made on behalf of sanctioned entities in Sudan, which came under a U.S. trade embargo for aiding terrorists and human rights abuses, the Justice Department said. BNP processed about US$6.4 billion through the U.S. between July 2006 and June 2007 on behalf of Sudanese entities, according to the statement.

Diplomatic Effort

As the severity of U.S. and New York settlement demands became clearer, French officials became more involved. In May, Christian Noyer, the Bank of France Governor, and Edouard Fernandez-Bollo, a senior French banking regulator, met with prosecutors and regulators, according to a person briefed on the matter.

Meanwhile, the case sparked public outrage in France. The right-wing National Front, which beat France’s two mainstream political parties in the May 25 European parliamentary elections, accused the U.S. of “racketeering,” saying the investigation was an effort to weaken BNP and aid its American rivals.

Hollande said June 4 that a disproportionately large penalty against BNP wouldn’t just harm the bank but could reverberate across Europe’s financial system. He raised the issue the following evening with U.S. President Barack Obama, who said that he wouldn’t intervene in the probe.

The following week, France’s central bank said BNP hadn’t violated French or European laws and that the probe may encourage companies to stop using dollars in international transactions. The U.S. claimed jurisdiction in the BNP case because the transactions were processed in dollars.

While BNP’s case is resolved, at least two other French banks are still under investigation. Societe Generale SA and Credit Agricole SA, respectively France’s No. 2 and No. 3 banks by market value, have said in company filings this year that they are conducting internal reviews and cooperating with U.S. authorities regarding dollar transactions involving embargoed countries.

BNP’s penalty dwarfs the combined US$4.9 billion levied against 21 other banks for transactions tied to sanctioned countries since Obama took office. Prosecutors argued that the more severe penalty was justified because the misconduct was more egregious and BNP didn’t fully cooperate with the investigation, a person with knowledge of the matter has said.

Corporate penalties for violating U.S. sanctions are escalating. London-based HSBC Holdings Plc agreed to pay US$1.9 billion in 2012 to resolve a sanctions-violation investigation and allegations of being used by Mexican drug gangs to launder money. It avoided a guilty plea by admitting wrongdoing.

The U.S. imposed sanctions against Iran in 1979 and Sudan in 1997. In November, the U.S. reached an interim accord with Iran for some sanctions relief in exchange for Iran curtailing its nuclear program. Diplomats want a pact by July 20 to rescind banking and trade sanctions in exchange for limitations on the Iran’s nuclear program.

The French have been at the vanguard of efforts to move back into the Iranian market. A delegation of 100 businessmen from France visited Iran in February.